3M Co (NYSE:MMM) has agreed to separate its Food Safety business and combine it with Neogen Corp (NASDAQ:NEOG).
- The transaction implies an enterprise value for 3M's Food Safety business of ~$5.3 billion, including $1 billion in new debt incurred by 3M's Food Safety business.
- The value represents an implied multiple of ~32x and 27x CY 2022E Adjusted EBITDA pre and post-run-rate synergies, based on NEOGEN's closing price as of December 13, 2021.
- The combined company is expected to have an enterprise value of approximately $9.3 billion, based on Neogen's closing share price as of December 13, 2021.
- The combined company will have a significantly expanded product offering in food safety, particularly indicator testing and pathogen detection areas, complementing Neogen's existing microbiology lines.
- Neogen shareholders will own ~49.9% of the combined company, and 3M shareholders will receive ~50.1% of the combined company. 3M will also receive consideration valued at $1 billion.
- The transaction involves a tax-free "Reverse Morris Trust" transaction structure, where 3M's Food Safety business will be spun-off or split off and simultaneously merged with a subsidiary of Neogen.
- The companies expect the transaction to close by the end of Q3 2022.
- Neogen's President and CEO John Adent and existing management team will continue to lead the combined company.
- Neogen held cash and investments of $400.88 million as of August 31, 2021.
- Price Action: MMM shares are trading higher by 1.19% at $176.65 and NEOG higher by 5.43% at $42.30 during the premarket session on Tuesday.
